Indian Hardware Design Services Firms Gaining Stature

Intensifying competition has driven equipment, semiconductor and other manufacturers to launch products that are superior in function, performance and cheaper than products from their competitors.  Manufacturers who are unable to launch newer products are fading out in the global market place.  This has created an opportunity for Indian corporations to make their presence felt in hardware development, including integrated circuit (IC) design and board design.

As one of the Japanese mobile manufacturer says the driving force behind recent outsourcing of core development processes to India by equipment, semiconductor and other manufacturers is recognition that, 'If the present development stance is maintained, it will become impossible to meet customer requirements, for both cost and development reasons.  ' Hence, the solution, which is gaining momentum, is outsourcing development to Indian companies to utilize far more designers, and at lower cost, than those available to Japanese firms in-house.  A comparison of monthly cost per designer, is - About 1 million Japan Yen (8500 US Dollars) for a major Japanese manufacturer, about maybe Japan Yen 700,000 to Japan Yen 800,000 (6000 to 7000 US Dollars) for a Japanese design service.  Whereas the offshore development designers get only Japan Yen 400,000 to 500,000.’  (3,500 to 4,000 US$).

The trend by equipment manufacturers to outsource core development decisions to Indian firms, including the division between functions implemented in software and those implemented in hardware, begun several years ago by US vendors.  In the last year or two, the Europeans have picked up the practice, and now Japanese companies are following suit.  Japanese manufacturers have been leaving some equipment development tasks such as board design up to Indian firms for some time now, but only after making in-house decisions about dividing functionality between hardware and software.  Indian suppliers who were till recently contracting manpower have demonstrated the front-end development capabilities needed to make decisions about implementing functionality in hardware vs software for equipment development, about system and logic design in semiconductor development.

This structural change is evident in recent tie-ups between semiconductor manufacturers and Indian companies.  For example, NEC Electronics, which has entered into agreements with Wipro and TCS, revealed that one of its objectives is to get Indian design firms, which are rapidly controlling more and more of the semiconductor selection process, to choose the Instant Silicon Solution Platform (ISSP).  NEC Electronics plans to expand the agreements in the future, covering cell-based ICs and other items.  At the end of 2005, Tensilica Inc of the US certified Tata Elxsi Ltd of India, a design services supplier, as a recommended designer for its Xtensa configurable processor.

In an another case, one Japanese manufacturer outsourced the development of the signal processing IC for a digital camera featuring 10 million or more pixels, slated to ship in a few years, to Wipro.  The IC is directly related to the value-added content of the camera, given the value of the industrial secrets inherent in the design data, Wipro brought Indian engineers to Japan, and has them working at the client's facility.  Part of the reason for this trend is the fact that the chip design expertise of Indian firms is rapidly approaching the level of leading semiconductor manufacturers in Japan, the US or elsewhere.  Wipro, for example, has already designed a chip with 23 million or more gates, and is now working on designing chips using 65nm process technology.

In addition, the abundant availability of skilled designers in the Indian design centres has strengthened the India outsourcing claim.  In the year 2000, Wipro had about 400 hardware designers, but today boasts about 1,500.  Of these, 700 or more are IC designers handling ASICs, ASSPs and other chips.  An engineer at one Japanese IC manufacturer, one of the 'top ten' worldwide in revenues, said, 'I hate to admit it, but that's a lot more than we have.'  And Wipro is not the only firm.  HCL Technologies Ltd of India, another major design services supplier, has about 1,000 designers, while TCS has about 500 hardware engineers and Sasken Communication Technologies Ltd of India has 400 to 450.  All of these major Indian outsourced design firms are working to boost the number of hardware designers they employ.  For example, TCS plans to increase employed hardware designers by 60% annually, reaching about 3,300 people in 2010.  Wipro also plans to increase its hardware design workforce by 20 to 30% a year.

With the transfer of design work to Indian firms picks up speed, manufacturers that can get along well with them will find it easier to boost competitiveness.  This is where Japanese firms are lagging behind firms in Europe or the US, though.  One design services provider in India explained why: 'Compared to European or American manufacturers, the Japanese often don't draw up tight specs.  They still haven't made the shift from how they've always handled development in-house, or with domestic suppliers.’  Japanese manufacturers need to learn how to clearly define which development processes they will handle and which are the responsibility of the Indian supplier, and how to draw up specifications to international standards to ensure that Indian engineers can understand them immediately.

The move is also effective in the construction of an industry-standard development platform, because Indian design resources can be leveraged to boost platform competitiveness.  The Open Multimedia Application Platform (OMAP) application processor from Texas Instruments Inc (TI) of the US is an excellent example.  Of the 1,500 hardware engineers employed by Wipro, about 300 are working only on TI jobs.  As Wipro explained, 'That is the largest single-client engineer allocation we have made.  The team handles design for a wide range of peripheral circuits in OMAP, such as drivers.'

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